Weekly Commodities Report: Metals Surge In Early 2017

Jan 13, 1:06 pm
Copper prices

Copper:  Strong China Data Sparks Demand

Copper prices have kicked off 2017 on a strong footing, trading back towards the highs of 2016. The US Dollar rally has taken a brief pause so far over early January trading as markets react to the Fed’s December FOCM meeting which saw the central bank noting an outlook of extreme caution over 2017 as they await more information on Trump’s policies.

The moves in Copper have mainly been fuelled by a broad surge in commodity demand in response to strong data out of China. The National Development Reform Commission, the head of China’s central planning body, noted that the country’s economy expand around 6.7% in 2016. The data was also followed by a further positive release with Producer Prices shown to have risen 5.5% in December, marking the fastest pace of advance since 2011.

Alongside positive China data, there was also positive input from the World Bank forecasting that the USA is set to grow around 2.2% as manufacturing and investment growth increase. The WB also noted that should President Trump’s proposed fiscal plans be fully implemented, it could increase GDP by 2.5% this year and 2.9% in 2018.

Commodity markets received a significant boost over the last two months of 2016 following Trump’s election as President as speculators banked on a surge in demand for commodities linked to the President’s proposed infrastructure expenditure plans.

The World Bank also noted that commodity-importing emerging market and developing economies are likely to grow around 5.6% this year. Overall, the forecasts encourage the view that copper is likely to continue to see significant demand over 2017 and thus keep prices supported.

copper

Copper prices are currently printing a second “inside month”, reflecting the contraction in momentum following the expansion in November. For now, bias remains to the upside and the next price targets/key resistance points will be the two upcoming bearish trend lines.

Iron Ore: China Furnace Shutdowns Fuel Rally

Iron Ore prices surged higher this week, breaking back above $80/ounce fuelled mainly by optimism linked to the steel sector capacity cut announce in China over the weekend. Chinese authorities made a renewed pledge to close illegal furnaces and slash the country’s excess steel capacity. The Hebei province, which is the country’s steelmaking hub, has set double steelmaking capacity cuts from 2016 to over 30 million tonnes this year.

iron

Price have turned higher again this year and are now challenging the $80 mark which was key resistance in 2016 before price broke higher on the US election.

Zinc: 2016 Rally Extends Into 2017

Zinc, which was one of the best performing metals over 2016, has begun the new year in an equally positive fashion. The metal continues to be supported by tight market fundamentals and expectations of a supply deficit. LME zinc prices soared by over 60% across 2016 fuelled by a significant decline in supply after a slew of major miners closed operations following the prior year’s weak prices. Simultaneously we saw a surge in demand linked to an increase in China’s infrastructure expenditure.

Zinc is forecast to continue to strengthen over 2017 though there is the possibility that last year’s rally will fuel a surge in reopening of mines which could cause a supply shock weighing on price. However, in December the CEO of Glencore, the world’s largest mining company, said that mining production would remain idle until such a time that market conditions would not be affected by new supplies.

zinc

Zinc is currently challenging the key 2730 resistance level which was the 2010 high. A break back above this level opens up the route to test the 2016 high next.

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With over 6 years’ experience analysing currency markets, James is now a well-known industry analyst focusing on price action trading and fundamental drivers. Beginning as a private retail trader, James developed a strong interest in understanding the fundamental aspect of the market before pursuing technical trading capabilities which he now uses to identify opportunities over a short-term horizon. Alongside his market experience, James is also IMC certified having achieved the qualification to help further his understanding not only of the markets but the industry as a whole. James has a strong interest in both fundamentals and technicals and uses both forms of analysis in generating and executing trade ideas, with trades generally lasting from a few hours to a few days.